Income inequality high or rising in 60 percent of countries with loans from IMF and World Bank

Income inequality is high or increasing in 60 percent (64 out of 106) of low- and middle-income countries receiving grants or loans from the International Monetary Fund (IMF) and World Bank, reveals new Oxfam analysis ahead of the 2024 Spring Meetings in Washington D.C. Countries with high levels of income inequality have Gini coefficients above 0.4, the warning level set by the United Nations.

• Income inequality has increased in 37 countries over the past decade, including Burkina Faso, Burundi, Ethiopia and Zambia.
   
• Income inequality is high in Ghana, Honduras, Mozambique and 39 other countries.

“The IMF and World Bank say that tackling inequality is a priority but in the same breath back policies that drive up the divide between the rich and the rest. Ordinary people struggle more and more every day to make up for cuts to the public funding of healthcare, education and transportation. This high stakes hypocrisy has to end,” said Kate Donald, Head of Oxfam International’s Washington D.C. Office.

“Agreement last year by the World Bank to target cuts in inequality for the first time in its 80-year history is a landmark move. But if the Bank is serious about tackling inequality, the first test will be making it a headline priority for its lending to the world’s poorest countries, being discussed now at the Spring Meetings,” said Donald.

Donor contributions to the Bank’s International Development Association (IDA), which provides grants or low-interest loans to the world’s poorest countries, over half of which are in Africa, have flatlined in recent years despite growing needs. World Bank President Ajay Banga has called on donor governments to make the next IDA replenishment the “largest of all time.”

Low-income countries also face a debt crisis, making an ambitious IDA21 replenishment all the more urgent. Ballooning debt and interest repayments are diverting scarce resources from crucial areas like public education and healthcare and social safety nets, threatening to unravel hard-won development gains. Based on World Bank analysis, Oxfam finds that half of IDA-eligible countries are overindebted and need nearly half (45 percent) of their debt cancelled.

Higher taxes on the income and wealth of the richest could raise trillions of dollars to plug IDA funding shortfalls and to fill the huge development and climate funding gaps in low- and middle-income countries. G20 Finance Ministers meeting in Washington D.C. during the Spring Meetings could play an instrumental role in unlocking this investment. Brazil, the current G20 Chair, has called for a global plan to ensure the world’s super-rich pay their fair share in tax. France has since added its support. Any global deal must ensure the super-rich are taxed at a rate ambitious enough rate to bring down inequality. For example, an annual net wealth tax of more than 8 percent would be needed to reduce billionaire wealth.

“We don’t buy the excuse that ‘we can't afford it’ —the money is there; it's just not flowing to where it’s needed. We urgently need donor governments to step up their contributions to IDA, and for the G20 to move forward with a global deal to tax the super-rich. It’s all part of ensuring that rich countries and rich people pay their fair share towards tackling inequality and climate breakdown,” said Donald.